News From the North East

March 22nd, 2008

News is emerging of exactly how Northern Rock will operate now that it is in Government hands. The ‘troubled lender’ has announced that it will cut a third of its staff and reduce mortgage assets by half, leaving current borrowers out in the cold when their deals expire.

The bank is expecting to cut just over 2,000 from its workforce by 2011, in an effort to help repay a £25 billion emergency loan Northern Rock was forced to borrow from the Bank of England last September to stop it going bust. The bank’s management hopes to pay back the loan in three or four years.

Northern Rock has said it is aiming to reduce its current loan book, which is worth £100 billion, to around £50 billion by selling off the mortgage assets to other lenders or by simply declining to offer new loans to existing customers.

The bank has said it will continue to offer prime mortgages to customers, but it will not give unsecured loans and those customers whose mortgages have come up for renewal are being encouraged to seek deals from alternative mortgage providers.

Ron Sandler, executive chairman at Northern Rock, denied that Government support gave the bank an unfair advantage over other rival mortgage providers. ‘We recognise that we’re supported by the Government and we don’t wish to abuse that support by competing unfairly. We’ll ensure we strike a sensible balance. Things that are being said aren’t always accurate. Our headline rates are between 6 per cent and 6.25 per cent and that’s well within the basic band’.

Northern Rock said today it will work ‘sensitively’ with its staff and Unite, the union, ‘to minimise the extent and impact of job losses‘.

However, Unite said it will oppose any compulsory redundancies and is seeking assurances that Northern Rock’s workforce will be reduced through voluntary means only. It would seem that controversy shows no signs of leaving Northern Rock any time soon.

This entry was posted on Saturday, March 22nd, 2008 at 1:45 pm and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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